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CAFC divided over divided infringement

On August 31, 2012 the Court of Appeals for the Federal Circuit released its en banc decisions in Akamai Technologies, Inc. v. Limelight  Networks, Inc. and McKessonTechnologies, Inc. v. Epic Systems Corporation.  In both cases the District Court below had granted summary judgement of non-infringement based on the CAFC decisions in BMC Resources, Inc. v. Paymentech, L.P. and in Muniauction, Inc. v. Thomson Corp, both of which had held that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement.

The Majority Opinion

The majority opinion (Judges Rader, Lourie, Bryson, Moore, Reyna and Wallach) concluded that notwithstanding that much of the briefing was directed to whether direct infringement can be found when no single entity performs all of the claimed steps of the patent, the majority concluded that it was not necessary to resolve that issue as the instant cases could be resolved by reference to the doctrine of induced infringement.  The majority distinguished “ infringement” under § 271(a) and § 271(b) and, following inducement theories in criminal and tort law and congressional testimony from Giles Rich, held that an party inducing infringement may be liable where the parties performing the claimed steps would not be liable for direct infringement:

The implication of that principle, as applied in the divided infringement context, is that a party may be liable for inducing infringement even if none of the individuals whose conduct constituted infringement would be liable, as direct infringers, for the act of infringement that was induced.

The majority further held that the direct infringer need not be an agent of the inducer or acting under the inducer’s direction or control:

On the other hand, inducement does not require that the induced party be an agent of the inducer or be acting under the inducer’s direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer. It is enough that the inducer “cause[s], urge[s], encourage[s], or aid[s]” the infringing conduct and that the induced conduct is carried out.

Judge Newman’s Dissent

Judge Newman fdramed the question before the court as whether a method patent is infringed when more than one entity performs the claimed steps of the method.  Judge Newman characterized the majority’s decision as a “spontaneous judicial creation” that improperly treats contributory infringement law as inducement cases. Judge Newman held that both cases on appeal could be decided based on existing law, including the allocation of liability between cooperating or interacting parties, holding:

Issues of induced infringement are not new, but this aspect is ill served by the majority’s distortion of the inducement statute, 35 U.S.C. §271(b), and has no support in theory or practice. This new rule simply imposes disruption, uncertainty, and disincentive upon the innovation communities.

The issues that were presented for en banc review can be simply resolved on the present law. The court should acknowledge that an all-purpose single-entity requirement is flawed, and restore direct infringement to its status as occurring when all of the claimed steps are conducted, whether by a single entity or in interaction or collaboration. Remedy is then allocated as appropriate to the particular case, whether for direct or induced or contributory infringement, in accordance with statute and the experience of precedent.

Judge Linn’s Dissent

Judge Linn, joined by Judges Dyk, Prost and O’Malley, would have upheld the single-entity requirement as set out in BMC and Muniauction, holding:

Accordingly, I would hold that direct infringement is required to support infringement under § 271(b) or § 271(c) and properly exists only where one party performs each and every claim limitation or is vicariously liable for the acts of others in completing any steps of a method claim, such as when one party directs or controls another in a principal-agent relationship or like contractual relationship, or participates in a joint enterprise to practice each and every limitation of the claim.

The Court reversed the judgments and remanded both cases back to the District Court for further processing.

A copy of the CAFC opinion may be found here.

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